CLEARWATER — Senior residents of a 208-unit affordable apartment community are now facing an uncertain future after a new owner said it plans to renovate the building, raise rents and eventually sell it.
Chuck Lane, Economic Development and Housing assistant director for the city of Clearwater, detailed the plans for Prospect Towers to a concerned City Council on July 13.
“This group’s long-range plans for the property are to rehab the building, rebrand it, raise the rents and when the dust settles in seven to nine years, sell the property to a long-term investor,” he said.
Unfortunately, he added, there is little the city can do other than attempt to connect tenants with support services.
“Those of us familiar with Prospect Towers knows that many of the current tenants will be displaced,” Lane said.
A rocky history
Covenant Capital Group based out of Tennessee bought the property at 801 Chestnut St. on May 26 for $16 million in what has been a string of sales of the site in the past seven years.
According to Lane, Prospect Towers has historically been reserved for senior living at affordable rates. Seven years ago, the tower was owned by a nonprofit organization, Affordable Housing for Seniors LLC, whose mission was to maintain the site for seniors in need of an affordable home.
Rents ranged from $476 to $606 each month for the small apartments.
In 2015, the nonprofit sold it for $8 million. The new owner raised rents incrementally but still limited the tower to seniors and kept relatively affordable rates, Lane said.
In addition, Senior Citizens Services, a local nonprofit, created a fund from proceeds of the prior sale and used them to offer about $350 a month to subsidize 52 apartments.
In January 2019, the property was sold again for $13.5 million.
“This transaction really opened the doors for a potential shift in how Prospect Towers was to be managed,” Lane said, adding that there was no intent to maintain the age restriction or maintain any affordability standards.
That investor was planning major renovations, but instead decided to sell the site to Covenant Capital Group, which also purchased Clearwater Oaks for $16.5 million in January 2019. That complex on Druid Road is now known as the Terraces of Clearwater Beach.
Lane said the group quickly removed the senior citizen requirement and expressed different plans for the complex.
“The plans for the property are to invest an additional $3 million in improvements and eventually charge full-market rent throughout the complex,” said Lane, who noted he spoke with Govan White, co-founder and principal of the group.
Lane said White, too, was concerned about the financially strained residents.
“The plan is to increase rents incrementally in the short term, keeping them under market value,” Lane said. “They will be raising rents by 6% as leases expire, which is an annual increase of about $50 per unit.”
He added they are also accepting Section 8 housing vouchers as a short- to mid-term strategy to help keep tenants in their homes for the time being.
However, Lane said a concerning turning point is coming Oct. 31, as the $18,000 per month that SCS was using to subsidize 52 units is coming to an end.
“All 52 of these leases expire Oct. 31, and that subsidy will end,” he said. “So, with that $50 increment and the loss of the subsidies, tenants will be paying an additional $400 a month, which is, for some, about twice what they’re paying out of pocket now.”
Nicole Malloy, regional property manager for the group, told the council that management has communicated with each of the residents and is working to find solutions for them.
She said 20 of those 52 tenants have already made other accommodations or have found other assistance, and they are also working on options such as extending leases at lower increases or relocation assistance.
“We haven’t quite figured out exactly what that’s going to be,” she said. “We’re going to make sure that’s appropriate for what their needs are. But we’re more than happy and willing to do whatever it takes to make sure that nobody is displaced at the end of that Oct. 31 expiration.”
Council member Kathleen Beckman said even finding a new home for the tenants will be difficult.
“The relocation assistance is going to be a major challenge, especially with our stay of evictions situation right now. ... I would wish you tons of luck with relocation assistance because we don’t have the housing out there,” she said.
At least 20 units must remain affordable, however.
In 2012, the city’s Housing division gave the property a rehab loan that required 20 units remain affordable until 2042.
City Attorney Pam Akin said enforcing that restriction is likely the only option the city has.
Lane said he is still working to help and has spoken with the Pinellas County Human Services Department, Clearwater Housing Authority, Pinellas County Housing Authority, the Pinellas Community Foundation and other nonprofits.
“All are willing to combine efforts to try to find solutions for tenants that are displaced,” he said. “Although it will be a pretty strong task.”